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Mercator Therapeutics is at the beginning of a journey to commercialize drugs derived from a new way of discovering treatments for cancer. Recently, the biotech startup closed a $2 million seed round of financing and completed an initial licensing deal for its peptide-based drugs. It now plans to settle into its first corporate office in Waltham, MA, after operating virtually since its founding in November 2009.

While Mercator is a young outfit, the executives behind the venture are veterans of the biotech industry. For instance, Roy Lobb, Mercator’s co-founder, chief scientist, and chairman, was one of the lead scientists behind Biogen Idec’s hot multiple sclerosis drug, natalizumab (Tysabri), and has been a founder of several biotechs such as Waltham, MA-based Avila Therapeutics. In fact, it’s the firm’s combination of exciting talent and recognizable names that drew me back to its story.

Last month, we were early on the news about the firm’s seed round and licensing deal with the University of Texas MD Anderson Cancer Center. Yesterday, Lobb, Mercator co-founder Mark Leuchtenberger, and CEO Chris Guiffre mapped out where the company wants to go with its drugs, which are based on a new approach to discovering cancer treatments called in vivo phage display. They also provided some perspective on the potential power of this technology, developed at MD Anderson, to help improve doctors’ ability to deliver cancer-killing drugs only to disease tissues, sparing healthy tissues.

At MD Anderson, researchers and Mercator co-founders Wadih Arap and Renata Pasqualini have been working on the vivo phage display technology for years. Its aim is to discover specific protein fragments, or peptides, that home in on tumor cells. The system also allows them to identify which specific receptors on the cells those peptides found their way to, Lobb explained.

Once it identifies cancer-targeting peptides, Mercator aims to turn them into delivery vehicles that will carry various tumor-killing agents to cancer cells. The startup has licensed nine peptide-receptor pairs for cancer treatment from MD Anderson. The lead drug involved in the deal is in initial human clinical trials for patients whose prostate cancer has spread to their bones. The team at MD Anderson is running that trial, and Mercator’s Guiffre says that data from the study are expected to show whether the peptide drug found its way to the intended tumor sites.

The MD Anderson researchers hope to identify more such tumor-targeting peptides through a special program at the center. In it, patients with terminal cancer are injected, under strict ethical guidelines, with libraries of engineered viruses called phage that express random peptides on their surface. After small biopsies are taken, the researchers can find out exactly which peptides ended up in the biopsied tissues, providing unique and organ-specific data, Leuchtenberger said. “Because they have the ability that previously nobody has ever had to do organ-specific screening in man, they are coming up with organ-specific receptors, and that’s one of the huge advances here,” he said.

Leuchtenberger first learned about the MD Anderson technology from Lobb last summer. Leuchtenberger, who has been CEO of New Haven, CT-based Rib-X Pharmaceuticals since March, said he first met Lobb about 20 years ago when he joined Biogen (now Weston, MA-based biotech juggernaut Biogen Idec (NASADAQ:BIIB)) as a business guy, when Lobb was already an established scientist. The pair later co-founded a virtual company called Albor Biologics in 2003 to commercialize Spanish researchers’ discovery of cell-adhesion molecules. Like Albor, Leuchtenberger said, Mercator has come together because of Lobb’s strong ties to his fellow scientists, in this case the team at MD Anderson. With the lead researchers at MD Anderson, Lobb and Leuchtenberger formed Mercator in November 2009.

Guiffre became the young startup’s CEO in April, joining the firm before it had licensed its technology or landed initial seed financing. He’s a former general counsel for Lexington, MA-based Cubist Pharmaceuticals (NASDAQ:CBST) who had been working as a biotech consultant prior to stepping into his role at Mercator. While a consultant, his contacts at the venture firm Abingworth Management put him in touch with its portfolio company Hydra Biosciences in Cambridge, MA, for which Guiffre helped engineer a licensing deal with his former employer, Cubist, that closed in October 2009. Later, the folks at Abingworth put Guiffre in touch with Lobb and Leuchtenberger at Mercator.

For Mercator’s seed round, Guiffre said that the startup received investments exclusively from individuals from the Boston area and near MD Anderson in Texas. While he wouldn’t name names, he said that the investors include his and Lobb’s former bosses at biotech companies and two oncologists. The firm plans to tap its first investment dollars from institutional backers in a hoped-for Series A funding round next year. Until then, the CEO says that he and Lobb plan to operate as the firm’s only employees. Mercator’s research will be conducted in the labs of the firm’s co-founders at MD Anderson.

“We think this is very exciting,” Lobb said. “Nobody has ever done this in a systematic way, and using the peptides, it should allow us to direct various warheads to the tumor and selectively destroy the cancer.”